Ever Wish You Could Re-Live Your College Years? Here’s an Opportunity for a Great Cause!

Hello Linked In!

My son, Justin, along with most of his brothers, is participating in a charity event called St. Baldrics. (Yes, that’s right… in a surprise development, my wonky son has stopped studying long enough to join a frat! Now, it is a frat full of young RPI engineering students. So let’s not get carried away. But it is a frat. Hijinks and shenanigans are involved.)

I digress, though. The young men are fundraising to help promote research into childhood cancer. At the conclusion, they will then shave their heads to raise awareness.

Being a supportive mother, I have made my donation ($250) on the condition that my very camera-shy freshman provide before and after photos.

Now Justin has asked if I can also spread the word to all of you. And if I do that, it seems only fair that you should be able to join in the fun as well. So…. If my Linked In/Facebook community, collectively, matches my donation, I will post those before and after photos for everyone to share at the conclusion of the fundraiser. I mean, this is clearly the only possible response; right? (Diabolical laughter! My children will need so much therapy….)

As an added bonus, if you all double my donation, I will also share with you the very special cheer of the RPI Engineers football team. For perspective, I first bring you this video clip from my alma mater… the Trinity University Miracle Lateral Play.  Suffice it to say, nobody in my family will ever be playing football for USC. Or UCLA.

Seriously, please help Justin with this great cause!  You can donate here.

Mette K. (Proud Mother)

Filing Alert: #Fallbrook Technologies Files Chapter 11 Petition in Delaware

Texas-based Fallbrook Technologies has filed for chapter 11 protection. The committee formation meeting will take place on March 9, 2018 at 10:00 a.m. in Wilmington, Delaware. The formation notice is available here.

World Domination, One Gear At a Time

Fallbrook develops and manufactures the NuVinci continuously variable transmission systems. What is that, you ask? It makes stuff more efficient. So the company’s mission can be summed up as achieving world domination by creating a better mousetrap. Or as it says, setting the new global standard for managing mechanical and electro-mechanical power systems.

And it will do this by “transforming gears to (NuVinci) spheres.” That is, by using a set of rotating and tilting spheres between the input and output components of a transmission. If you have a degree in engineering, perhaps this brings something to mind. For the rest of us, the company has provided a helpful illustration.

Cool! Fallbrook’s system is now commercially available for bicycles and e-bikes. And, Fallbrook says, its technology has exciting applications in machinery, vehicles, and other equipment.

The company has two divisions.

  • Its Enviolo-branded bicycle division, which was formed to demonstrate mass market viability and to continue to develop the NuVinci technology.
  • Its licensing division, which provides NuVinci technology to “industry leaders” such as Allison Transmission, Dana Limited, TEAM Industries and Conti Temic microelectronics.

The Start-Up Business Encounters Liquidity Problems

The company landed in bankruptcy because of its “inability to meet operating expenses and satisfy debt obligations with current revenue streams.” Translation: Licensees are not yet selling products that utilize NuVinci, so hoped-for royalty income is not yet there. And revenue from its bicycle division is not enough to sustain the company.

Before filing for bankruptcy, Fallbrook says it “exhausted all other available courses of action, including a comprehensive marketing process for the Debtors’ assets, refinancing existing obligations, and negotiations with its noteholders.”

The Bankruptcy Plan

Those efforts, Fallbrook tells us, resulted in a restructuring support agreement that will de-leverage its balance sheet by allowing it to pay interest in kind, convert certain debts to equity, and obtain additional working capital.  The plan is supported by holders of the company’s senior secured notes, bridge notes, and subordinated convertible notes. The company hopes to obtain support from others in the coming weeks. Here is what the plan looks like:

  • Administrative Expense Claims: Paid in full in cash or other agreed treatment.
  • Priority Claims: Unimpaired.
  • Other Secured Claims: Secured claims other than existing notes and bridge notes to be paid in full in cash, unimpaired, reinstated or receive other agreed treatment.
  • Senior Secured Claims: Existing notes to be allowed in the amount of roughly $49.6 million, and bridge notes to be allowed amount of roughly $8.8 million. Existing notes and bridge notes to be cancelled, with holders participating in the new second lien facility and equity in the reorganized company.
  • Convertible Notes Claims and General Unsecured Claims: If the class of general unsecured claims votes to accept the plan, claimants will receive a pro rata share of 13% of the new common stock.
  • Existing Equity Interests: Extinguished.
  • Convenience Class: TBD

Notwithstanding its revenue struggles, Fallbrook says that it believes in its technology. Perhaps more importantly, it believes the total market for its technology is $150 billion.

Financing and Critical Vendor Status

To support its restructuring, Fallbrook has obtained a $8 million credit facility from with Kayne Credit Opportunities Fund (QP). Fallbrook has also asked for authority to pay critical vendors up to $1.25 million. And key vendor Tri Star has agreed to continue performing under a manufacturing and supply agreement in exchange for critical vendor status and other protections.

The Company’s Current Capital Structure

Secured Debt:

  • Existing notes: $49.6 million
  • Bridge notes: $8.8 million

Unsecured Debt:

  • Convertible notes: $15.3 million
  • Trade debt: $5.4 million

Case Information

The debtors are represented by Shearman & Sterling and Young Conaway Stargatt & Taylor. Roy Messing of Ankura Consulting is the CRO.

The case has been assigned to Judge Mary Walrath (case number 18-10384 (MFW)).

Mette K.

HCR ManorCare Files Prepackaged Chapter 11 Petition

HCR ManorCare, Inc. commenced a chapter 11 bankruptcy case on March 4, 2018. It accompanied the filing with a “prepackaged” chapter 11 plan. The company has requested a hearing to approve that plan on April 12, 2018.

The  debtor, through its operating subsidiaries, is a Toledo-based provider of short-term, post-hospital services and long-term care. Its operating subsidiaries have not filed for bankruptcy protection.

HCR ManorCare negotiated its reorganization plan with Quality Care Properties under a plan sponsor agreement with QCP, HCP Mezzanine Lender, LP and certain lessors. It has also negotiated a restructuring support agreement with Carlyle MC Partners, L.P., Carlyle Partners V-A MC, L.P., Carlyle Partners V MC, L.P., CP V Coinvestment A, L.P., CP V Coinvestment B, L.P. and MC Operations Investments, LLC. The primary features of the plan are:

  • QCP will receive 100% of the stock of the Reorganized Debtor in full satisfaction of its Claims against the Debtor;
  • No other creditors will be impaired;
  • Equity holders will not receive distributions, but the company’s majority stockholders support the plan;
  • HCR III, QCP and the company’s lessors will enter into a master lease amendment.

The case number is 18-10467.

Mette K.


Reasons Not to Move to Delaware: Asparagus Legs

Any of you with first-generation, immigrant parents will appreciate that some things simply don’t translate.

Lost in Translation: Asparagus Legs!

My mother immigrated to the US from Denmark in 1967, swept off her feet by the charming American GI who would later become my father. And every spring, seemingly inexplicably, but without fail, my mother would throw open the doors, step out into the sunshine, and tsk in that very Danish way of hers. “Look at those asparagus legs!” she would exclaim, scrutinizing some unfortunate young woman. My brother and I were perplexed. We were mortified. We hoped that, with her thick “Swedish Chef” accent, nobody had understood her.

Danish Asparagus: The King of Vegetables

25159810 - white asparagus with hamWhat I later learned is that, if you are Danish, asparagus reigns supreme, the king of all vegetables. Their asparagus season lasts only a few weeks in the spring. And – wait for it! – the asparagus is white or green. But it is the white asparagus, grown mostly underground on their northern coast, that they crave. And when the crop comes in, chefs at fine restaurants worldwide compete to buy up all of this white asparagus before the season ends. Or the Danes eat it all.  So if you are Danish, asparagus season is a Very Big Deal. The kind of big deal that requires fine white linen napkins and the best family silver. (Seriously. If you are looking for a recipe for white asparagus, you might try White Asparagus with Egg, Parsley and Butter.  Very, very Danish.)

Landing the Plane… in Delaware

beach-beautiful-blue-coast-40976So, when the arctic blast finally moved on,  and the temperature rose to a lovely, Scandinavian-like 67 degrees here in Delaware, I moved my slacks to the back of my closet. I stepped outside in my dress and heels. And I looked down in horror. “Oh, no! Look at those asparagus legs!” That’s right, five months of Delawarean winter, starved of sunlight… and my legs are as white as Danish asparagus.

Time to start planning a vacation in Hawaii next Christmas.

Mette K.

Filing Alert: #Tops Supermarket Files for Bankruptcy

Regional grocery chains continue to struggle as Supermarket chain Tops Markets filed for bankruptcy protection in Manhattan yesterday. (Is the re-pocalypse heading for your local grocer?  Learn more here.)

The Company

Tops operates 169 full-service supermarkets, 168 under the Tops trade name and one under Orchard Fresh. And franchisees operate five more. The markets are focused on key regions in upstate New York, Northern Pennsylvania, and Vermont.

Tops’ Bankruptcy Objectives

The company has identified three core objectives: reducing its debt, renegotiating or cancelling leases and supply agreements, and negotiating with its labor unions.

Tops hopes to complete its bankruptcy process in roughly six months. During its first three months, it plans to focus on creditor negotiations. Then, if all goes well, it will implement its negotiated plan. Towards that end, it has agreed to some milestones:

  • April 2, 2018: Entry of final orders approving its financing;
  • May 7, 2018: Execution of a restructuring support agreement with key lenders;
  • July 21, 2018: Filing of a disclosure statement and solicitation of a plan acceptable to its key lenders, with confirmation 60 days thereafter.

Financing to Support Its Operations

The company says it has sufficient liquidity to fund operations, and it plans to continue business as usual. It has been negotiating with an ad hoc committee of its senior secured noteholders regarding a “consensual deleveraging transaction.”  (In English, Tops has asked its secured lenders to forgive some of its debt.) That committee will provide a $125 million loan to support the bankruptcy filing. And Bank of America, the company’s asset-based lender, will provide a $140 million, revolving credit facility.

In addition, the court has authorized Tops to pay up to $10 million to vendors for goods delivered postpetition and up to $5.3 million for employee wages. And C&S Wholesale Grocers, which procures most of the company’s for-resale goods, has agreed to provide Tops with an additional week of trade terms.

Additional Information

On Friday, Feb. 23, at 2 p.m. Eastern, Reorg. Research will host a webinar about the case. Their team will provide an overview of the company and its financials and discuss the bankruptcy filing, including highlights from the first day hearing. If you have questions, stay for the Q&A session at the end. You can register here.

The Bankruptcy Docket

The case has been assigned to Judge Robert Drain (#18-22279 (RDD)). Tops is represented by Weil, Gotshal & Manges as legal counsel. Its investment banker is Evercore Group. FTI Consulting is the financial advisor. And its real estate advisor is Hilco Real Estate. The docket and additional information is available from Epiq, the company’s claims agent.
Mette K.